TOTAL ASSETS$14,500,000.00

TOTAL LIABILITIES $10,500,000.00

TOTAL STOCKHOLDER'S EQUITY$4,000,000.00

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY$14,500,000.00

Redtrucks is looking to finance risk via the risk retention financing method for this loss exposure.The financial information on the balance sheet will remain stable for the next decade.Redtrucks internal rate of return is 12%.

Redtrucks will utilize the assets method to determine how much it's willing to retain, which is .5% - 1% of total assets.Claims history losses are usually have a mean of $100,000 and a standard deviation of $75,000.

Using the present value of future cash flow, what would the retention option cost?Be mindful this decision has a 10 year time frame.

Am I looking at the total assets of $14,500,000.00?If so, would the retention at .5% be $72,000.00 and at 1% $145,000.00?